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Mortgage Market in Review – March 10, 2014

Market Comment

Mortgage bond prices finished the week lower which pushed rates higher. Prices were positive the first of the week in response to the tame PCE core inflation release and significant stock weakness. Unfortunately that reversed Tuesday with the stock rebound. Weekly jobless claims came in at 323k versus the expected 336k Thursday morning which was not rate friendly. The heavyweight employment report was mixed but rates pushed higher. Unemployment came in at 6.7% versus the expected 6.6% mark. Non-farm payrolls rose 175k versus the expected 165k increase. Mortgage interest rates finished the week worse by approximately 1/2 of a discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

3-year Treasury Note Auction

Tuesday, Nov. 11,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

10-year Treasury Note Auction

Wednesday, Nov. 12,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Weekly Jobless Claims

Thursday, March 13,
8:30 am, et

327k

Important. An indication of employment. Higher claims may result in lower rates.

Retail Sales

Thursday, March 13,
8:30 am, et

Up 0.2%

Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.

Business Inventories

Thursday, March 13,
10:00 am, et

Up 0.4%

Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.

30-year Treasury Bond Auction

Thursday, March 13,
1:15 pm, et

None

Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.

Producer Price Index

Friday, March 14,
8:30 am, et

Up 0.2%,
Core up 0.2%

Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.

U of Michigan Consumer Sentiment

Friday, March 14,
10:00 am, et

81.2

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Weather

Economists often debate the effect weather has on the economy. There is no debate the Federal Reserve believes weather plays a role. They mentioned the word “weather” 119 times in the latest Beige Book report on economic conditions. Weather was cited in the reports of all 12 districts.

The exceptionally cold winter across most of the U.S. is to blame for lots of things, from 36 hour traffic jams to broken pipes all along the east coast and high heating bills. However, weather events have been great for some businesses despite being terrible for others. The overall impact on the economy continues to be debated.

At the end of 2013 the US economy seemed to be moving in the right direction, albeit at a slower pace than the Fed wanted. Jobs and house prices rose and inflation was below the Fed’s “target” rate of 2%. Fast forward to 2014 and the picture looks a little different. Consumer spending and confidence is wobbly. The Fed indicated, “Retail sales growth weakened since the previous report for most Districts, as severe winter weather limited activity.”

Time will tell if the recent economic slowdown will reverse with a change in weather. Either way, the US has a long way to go to reach GDP levels necessary to increase employment and the tax receipts that go with growth.

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